A Reply to Aashna Desai

A Reply to Aashna Desai

We must recognize and compensate for the intrinsic political weaknesses of taxation—and specifically progressive taxation—through the alternative fiscal strategy of economic democracy.

This is a reply to Aashna Desai’s “The MMT Trap.” Read Daniel Wortel-London’s original article, “The Tax Trap,” here.

I am grateful for Aashna Desai’s response to my article and for the campaign to build a more progressive tax state in New York. As my article states, campaigns for progressive taxation and the funds they win can be strategically vital to building progressive capacity and for challenging the ravages of austerity. For that capacity to be fully realized, however, we must recognize and compensate for the intrinsic political weaknesses of taxation—and specifically progressive taxation—through the alternative fiscal strategy of economic democracy.

These strategies can complement one another, but complementarity flows both ways. Funds wrought by the progressive tax state can provide subsidies and loans (via public banks) to kickstart public and cooperative enterprises. We need not and cannot wait, however, for that state to be established before launching campaigns to promote economic democracy in our communities. Indeed, such campaigns are a crucial means of both building up the tax state and maintaining popular control over it—and its potential MMT successor.

The key political weakness of the progressive tax state is that it renders the progressive public sector dependent upon its political opponents and their often-regressive enterprises for revenue or loans. It bears emphasizing that this real (or perceived, as per MMT) fiscal dependency is perhaps the largest factor that has co-opted or immiserated social democratic administrations across the twentieth century, from 1970s New York City to 1990s Scandinavia. To avoid repeating this history, we must expand the public’s power over those who furnish public revenue. This can be done through some combination of union drives, radical income redistribution, anti-monopoly measures, and campaigns to shift patterns of economic ownership along horizontal and solidaristic lines.

Desai and I agree on the general desirability of these strategies. Where we seem to disagree is on the question of sequencing.

Desai argues that local campaigns for economic democracy cannot take place “spontaneously” but must wait for the start-up capital and equity generated by an expanded fiscal state before proceeding. I disagree: it is both unnecessary and strategically disastrous to ask the grassroots to wait before fighting for economic democracy in their communities.

Activists in cities such as Cleveland, Ohio, and Preston in northern England have not waited for increased tax revenues to challenge the power of the wealthy. Instead, they have used bottom-up policy tools already at their disposal to

• redirect existing public contracts to small businesses rather than corporate actors,
• channel extant economic subsidies to worker-cooperatives rather than financialized firms,
• encourage local nonprofits to procure goods and services from local employee-owned firms,
• provide progressive firms with the same kind of technical assistance and favorable regulatory, land use, and zoning policies they provide to the wealthy for-profit sector.

Using these and other community wealth-building strategies, progressive administrations have been able to grow their economies along inclusive and equitable lines, revive the public sector’s bottom line (and more efficiently than self-destructive trickle-down growth strategies) and broaden the left’s constituency and presence in civil society. Moreover, they have increased their capacity to mobilize for other progressive measures—including progressive taxation—on higher tiers of governance.

This brings me to the response’s criticism of MMT as politically naïve. I agree that any progressive effort to enlist MMT must be cognizant of how existing power relations, particularly at the federal level, might distort its use. I also agree that directing that use toward sustainable and equitable ends will require political conflict and building working-class power along intersectional lines.

Nonetheless, there is nothing inherently apolitical or centrist in MMT. There are many non-hedge-fund advocates of MMT who recognize the necessity of sustained conflict over budgets and resources well after we “mint the coin.” Moreover, the same criticism Desai levels at MMT can be directed toward the progressive tax state: without recognizing the necessity of countervailing power on the left, growth in the public sector’s fiscal capacity can and will be turned against us.

Rather than level ideological accusations at one another, we need to assess whether the concrete operations of MMT—or any other policy strategy—will promote or undercut that countervailing power. And Desai raises serious concerns that MMT would undermine the left and its constituency. But I am not certain whether destructive inflation and volatile interest rates, unjust wealth accumulation, or further reifying the imperial privileges of the United States would necessarily follow from pursuing MMT—and I’m not sure anybody is. One of the difficulties of mainstream MMT is that we cannot fully “test” whether these propositions are true on the local level; rather, we would have to wait for their adoption at the federal level before fully gauging the consequences.

I am not inclined to prematurely rule out MMT, however, any more than I would rule out the cooperative commonwealth because it has not yet been accomplished. MMT is galvanizing a wide public to question pieties of public finance while opening new horizons of political possibility. We can work to radicalize this public and explore those possibilities while debating and conducting whatever research we can over MMT’s potential effects.

Through this work we can get a clearer understanding of whether the worst-case scenario is inherent to MMT, or if negative consequences can be avoided through compensatory policies. If the liabilities of MMT are grievous and cannot be avoided, I would be perfectly happy to jettison it. If they are found to be negligible or avoidable, we can keep MMT as a potential tool once we are in position to deploy it. In either case, I’m not convinced that building a progressive tax state in the short run will undermine turning toward MMT in the long run.

Regardless of whether the progressive fiscal telos is toward full public ownership, a progressive tax state built upon cooperative enterprises, or MMT, there is one non-negotiable: decentralized, democratic, and egalitarian control over the means of revenue production. To achieve this, we need to ensure that we distribute not just the wealth but the power of the 1 percent to working people. Campaigns such as Invest in Our New York can help accomplish this by providing greater funds for economic democratization as well as for budget balancing and social services. If they do not, we will suffer the same fate as progressive liberals and social democrats across the twentieth century: content to use the master’s tools to mitigate the master’s depredations, only to wind up being dominated by those same tools.

Daniel Wortel-London is a historian of American economic development and urban politics based in New York City. His writings can be found at www.publicspaced.com, and he is on Twitter @dlondonnyu.